Altcoin–Bitcoin Mean-Reversion Arbitrage and Liquidity Considerations

Summary

This study presents a cryptoasset statistical arbitrage signal based on mean reversion associated with a leading momentum factor in cryptocurrency returns. It outlines an algorithm and provides source code, though the available description does not specify signal construction, portfolio rules, or trading frequency.

Empirical analysis is used to identify which cross-sections of cryptoassets show a statistically significant effect. The study also discusses liquidity and what the findings may imply for trading these assets. The excerpt does not report effect sizes, sample dates, transaction costs, or out-of-sample performance, so significance alone cannot establish that the opportunity is executable or profitable after costs. Liquidity is flagged as relevant, but its impact is not quantified here.

Key ideas

• The proposed cryptoasset arbitrage alpha is based on mean reversion linked to a momentum factor.
• The study uses empirical data to identify cryptoasset groups where the effect is significant.
• Liquidity is considered when discussing the practical implications of the signal.
• The available description omits effect sizes, trading rules, and performance after transaction costs.

Tags

# Altcoin-Bitcoin Arbitrage


# Altcoin-Bitcoin Arbitrage









We give an algorithm and source code for a cryptoasset statistical arbitrage alpha based on a mean-reversion effect driven by the leading momentum factor in cryptoasset returns discussed in https://ssrn.com/abstract=3245641. Using empirical data, we identify the cross-section of cryptoassets for which this altcoin-Bitcoin arbitrage alpha is significant and discuss it in the context of liquidity considerations as well as its implications for cryptoasset trading.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.